Judging from the reports we have had, this regional office demands a thorough examination. The reports of questionable administration that we plan to examine include: 1. Extensive work done by a private firm in a Government officework that was completed months before the issuance of a public invitation for bids to do the work. Briefly, we want to know why the Henges Co., Inc., of St. Louis and Kansas City, installed more than $10,000 worth of partitions in the Commodity Stabilization Service office here long before GSA issued invitations for bids to do the work. We want to know about GSA efforts to pay for all the work as negotiated purchases, despite laws to the contrary. We want to know why GSA didn't issue a public invitation to have the work done until 4 months after the Henges firm already had installed the partitions. We want an explanation of the tactics utilized to screen this peculiar reversal of normal Government procedures. 2. Another report concerns the award of a Federal lease contract to a nonexistent corporation which has placed its organizers in a position to make almost a million dollars on their $1,500 investment. GSA issued an invitation to bid on April 3, 1959, for office space in Kansas City for the Army, Navy, and Air Force. I hope there is no prejudice against the Marine Corps, in which I served. After some problems were resolved, two bidders were eliminated and the award was made by the GSA on August 14, 1959, to the Third Recon Corp. of Kansas City. Our study indicates that the firm was not a corporation until September 4, 1959. We would sort of like to know why GSA accepted the bid in the name of a corporation which wasn't incorporated. We want to know if the recipients of this rather lucrative contract were qualified bidders at the time they received the contract award. We would like to know the date of the first time the corporation obtained any interest in the property it offered to lease the Federal Government. Our study has indicated the firm did not qualify as bidders, nor did it have any interest in the property it offered to lease the Government until more than 2 months after it received the award from GSA. Our investigation indicates that W. D. Ray and Ralph W. Rice, Jr., both of Kansas City, obtained a 90-day option for $1,000 on April 17, 1959, to lease the warehouse property at 2406 Broadway, Kansas City, for 3 years. That's all the record shows this unincorporated pair had in the name of its nonexistent corporation when it offered to lease the property to GSA for 3 years with five 1-year renewal periods. Indications are they put up another $500 to finally incorporate. Armed with the GSA award, Ray and Rice exercised their option and took a lease on the building October 7, 1959, assigning the lease to their Third Recon Corp. 2 weeks later. They had an option purchase price of $275,000, plus an obligation to put in up to $200,000 worth of improvements. The Government will pay Third Recon $496,800 for the first 3-year period, and that is based on an officially approved appraisal which lists the value of this building as $727,000. The Government got options to renew the lease for two more 3-year periods. And so the Third Recon's shrewd investors-you have to admit these people are pretty thorough at the end of 9 years, will stand to own a building which was appraised recently as $727,000, and have a tidy sum left overwhich is a substantial gain on their $1,500 investment, when you can get a good Government contract. We have no quarrel with businessmen trying to drive the best bargain they can. That's business. It is the American way. There is nothing wrong with making a profit. We are for it. But it is the Government's business to get the best bargain it can for the taxpayers. And we want to know why the GSA officials weren't more alert to the details of this negotiation. We would like to know who in the GSA considered Third Recon a qualified bidder, and why. We want to know if bids accepted under such circumstances are considered a binding acceptance by the Government. We also want to know if it is customary in GSA's region 6 to accept bids from people who don't have what they are offering. And whether awards are commonly made to unqualified bidders. That is the second point we are interested in examining. The third point we are interested in looking into involves the ent abuse of a dedicated career Federal employee. This key worker in the GSA's regional staff apparently has been subjected to pressure because he wouldn't rubberstamp contracts he believed smacked of favoritism. appar The subcommittee has been studying reports that this oppressive treatment has been directed at Ralph G. Warren, Chief of the Design and Constructing Division of GSA's Public Buildings Service in region 6. Mr. Warren is a veteran public servant, close to retirement, and apparently has a fine record. His post is a responsible one and his approval, under normal conditions, is required on all construction projects. Mr. Warren is the man who, in good conscience and with opinions based on years of experience, must be assured that the taxpayers are getting solid value when money is spent on construction in GSA's region 6. Mr. Warren's insistence on the Government getting that solid value apparently has jeopardized the fine reputation he earned over a long period. I wonder if this is an example of general personnel practices in GSA's region 6. Is it the general rule in this region to try to fire any official who won't goosestep to his superior's demands for special treatment to favored contractors? We would like to know the facts and who formulates these policies in region 6. That is the third point. The fourth major facet of our inquiry is the report we've checked that a top GSA official in Kansas City has been indulging in a speculative real estate venture, contrary to GSA regulations. Our reports indicate that Mr. Tom Jay, the regional commissioner of GSA's region 6, the top GSA post in this seven-State area, is a full partner in a speculative effort to build a large de luxe motel in downtown Kansas City. The GSA has very specific orders concerning participation in real estate transactions by its employees concerned with real estate matters, as Mr. Jay naturally is. Neither directly, nor indirectly, without the prior approval of the Public Buildings Commissioner in Washington, may such an employee purchase any interest in real estate for purposes of speculation or investment. We hope to hear the full facts and in complete fairness to Mr. Jay he will be given an opportunity to testify later during the day. We also will touch on several sidelights, including some interesting reports concerning contractual procedures in the Mart Building in St. Louis, and we would like to know a little more about that. The reports that we have examined in our preliminary investigation have given us a rather sordid picture of irregularities in the operation of GSA's region 6. The GSA itself, as most of you know, is not generally considered one of the "glamour" agencies of the Federal Government. There is not too much romance in keeping the buildings up, patching them, keeping them clean, and disposing of the surplus, doing the building and doing the remodeling, buying and distributing the supplies for our Government. But the fact is that GSA spends a vast amount of your money and mine performing these vital services, and we feel that it is only fair to insist that it carry out this mission with economy and efficiency and with fair, open treatment of its employees as well as the people that is the businessmen-with whom they do business. There is no place for favoritism when the taxpayers' money is being spent. I am sure that GSA's able Administrator, Mr. Franklin Floete, also is interested in learning the full story and, judging from his past resolve, I think he will take steps to remedy any maladministration that our hearings might reveal. We have assembled with care all the facts we could muster and we will try to present them in an objective manner. We have called witnesses we hope will clarify the full story behind these reports. Now without any delay I would like to ask our first witness, Mr. Ralph Warren, if he will come up and be seated. Mr. WALLHAUSER. Mr. Chairman, may I make a short statement? Mr. BROOKS. I would like to introduce the Honorable George Wallhauser. Mr. WALLHAUSER. I am glad that Chairman Brooks has emphasized the fact that we do not wish to prejudge anyone. We are here only to get the facts. We will not convict anybody, I am certain, by innuendo. I know Chairman Brooks will be very fair. He always has been. This investigation, as I understand it, is merely to develop certain facts which will clarify the record. I would also like to state for the record that a statement in his opening statement that the subcommittee has been studying reports that this oppressive treatment has been directed at Mr. Warren and so forth, I think should be corrected to say the subcommittee staff and not the subcommittee has been studying the reports. I have not-and properly so-been included in any of the studies, and I might say that many of the facts that will be presented today will come to my attention for the first time today. Thank you, Mr. Brooks. Mr. BROOKS. Thank you very much. Mr. Warren? Would you raise your right hand and be sworn, please? Mr. WARREN. Yes, sir. Mr. BROOKS. Do you swear to tell the truth, the whole truth, and nothing but the truth, so help you God? Mr. WARREN. Yes, sir. TESTIMONY OF RALPH G. WARREN, CHIEF, DESIGN AND CONSTRUCTION DIVISION, PUBLIC BUILDINGS SERVICE, GENERAL SERVICES ADMINISTRATION, REGION 6, KANSAS CITY, MO. Mr. BROOKS. Be seated and give us your full name and state your position with GSA. Mr. WARREN. My name is Ralph G. Warren, Chief of the Design and Construction Division in region 6, Public Buildings Service, and as such I have been delegated overall and sweeping-complete authority as contracting officer for all construction work. Mr. BROOKS. Who are your supervisors, sir? Mr. WARREN. My immediate supervisor is Mr. E. H. Lund, Director of Public Buildings Service of the region, and Mr. Thomas Jay, Commissioner, GSA region 6, and Mr. L. L. Hunter, Assistant Commissioner for Design and Construction in the central office. Mr. BROOKS. Will you tell us briefly of your past Government service and experience which might qualify you for this position you now hold? Mr. WARREN. I have passed an examination and entered into services for the Government as an engineer over 30 years ago. I have been progressively promoted to my present position. I am licensed to practice engineering in private industry in the States of Kansas and Missouri, and am registered as such. Mr. BROOKS. The subcommittee investigator while in the GSA regional office talked with you several times, did he not? Mr. WARREN. Yes, sir. Mr. BROOKS. In addition to your name being mentioned in the files, which we were looking over, on a couple of cases that we were reviewing, I believe you were referred to by Mr. Jay as a disgruntled employee. So naturally we wonder why you were disgruntled. I wonder if you would please tell us what caused this viewpoint in Mr. Jay's mind. Mr. WARREN. Sir, I believe a more accurate description of that situation would be that I'm confronted with two disgruntled supervisors. Their disgruntlement seemed to become acute and somewhat heated during the early handling of the award of a contract to the Hercules Construction Co. in St. Louis, and during the supervision and operations of that contract. Mr. BROOKS. With regard to this removable partition manufacturer, I wonder if the Henges Co. and the O'Brien Co., which both apparently installed partitions, had ever competed as equal products on any Government job prior to the Mart Building. Mr. WARREN. In this region, in the GSA, they have been competing on a basis of equality in quality of their product for several years, and there have been many, many cases, and I am informed with the U.S. Engineer Corps and in private business they have been competing for years on that basis. Mr. BROOKS. Would you just give us briefly for background purposes the circumstances regarding the remodeling of the Mart Building and the action taken by the GSA in that remodeling process? Mr. WARREN. That was a pushup job that had a great deal of urgency because Mr. Floete had indicated that he wanted the Archives and Records Building, new construction building award in St. Louis, 58364-60- -2 on schedule. And in order to have procedures for that contract to be awarded and the building on the site to be removed-to wit: the old Marine Hospital building was one of them—it was necessary to vacate the armed services recruiting services from the old Marine Hospital building. So he gave down very strict orders-and we respect Mr. Floete very highly and his word. When he wants something he wants it and we try to deliver. Mr. BROOKS. I might add that he is pretty widely respected in Washington. Mr. WARREN. Thank you. Mr. BROOKS. He is a dedicated servant of considerable ability. Mr. WARREN. I received instructions from Mr. Lund, very evidently through Mr. Jay, that even though there was a very short time, we must get the quarters in the old Mart Building remodeled for the occupancy of the Armed Services Building completed in order that when the contract is awarded there would be no delay in the demolition and razing of the buildings on the site for the new Archives and Records Building. It was a very push job. As a matter of fact on about February 25 is when we started to work on plans and specifications and investigations of what the needs of the agency were in accommodating themselves in the building. The project was a rather complicated project in that it had medical services, it had X-ray rooms, lead-lined rooms, it had many electrical facilities which were unusual to normal office occupancy. It was not an easy ordinary job of remodeling. In spite of that fact, on March 13 we had in a hurried fashion, and always with certain calculated risk, completed the plans and specifications and had them ready for duplication, and they were mailed on the market on March 16. We cut down the advertising time some in order to push it along. Bids were opened on April 6 and then an unusual feature of it, too, was you will note, that we awarded the contract 2 days later, which is pretty fast moving for a contract of $177,000, when you have many ramifications of investigation of the quality—I mean of the competof the contractor and such. ency Mr. BROOKS. Yes, it is. Did the Henges Co. assist GSA in drafting these specificatons? Mr. WARREN. The Henges Co., like many other manufacturers and material people, volunteered their services and help in preparing the specifications. While they did not give me any particular advice, they did, I understand, help the design branch, people in the design branch, in this hurried preparation of these papers for the contract. Mr. WALLHAUSER. Mr. Chairman. Mr. BROOKS. Mr. Wallhauser. Mr. WALLHAUSER. Are you complaining about the award of the contract? Mr. WARREN. Sir, I don't know that I am complaining about anything. Would you clarify your Mr. WALLHAUSER. You say this was a rather hurried award, 2 days time. Is the implication that this should not have been awarded? Mr. WARREN. No, sir; there is no implication. Mr. Floete gave orders which were logical. It is perfectly logical that a new building |